Buying your first home is an exciting experience, but it can also be a daunting one. There are so many things to think about: the area you want to live in; the size and type of home you want; First Home Owner Grant eligibility; and, of course, the price you are willing to pay.
With the help of Domain.com this article will take you through some of the steps to buying your first home, from getting your first home buyer finances in order to choosing a place to live and completing the sale:
Do your real estate research:
Do your own research to find out if your target suburb is hot or not. Price guides and suburb sales history reports are available from researchers, such as Australian Property Monitors, and Domain’s search tools which help filter your research and home in on the suburb, price range and property type that is right for you.
See if you are eligible for First Home Owner Grants. If you have never bought a home before, you may be eligible for a First Home Owner Grant (FHOG). FHOG is a national scheme but is funded by the states, so the amount of money granted varies.
When determining your eligibility the government will take into account things like previous home ownership or investment properties, and your spouse or defacto partner’s home ownership. You do not need to apply ahead of time but you do have to make your application within 12 months of buying your new home.
Understanding mortgages:
Making sure your finances are in order before you find a home to fall in love with is a crucial first step. You might have a deposit ready, but you will also need to study your mortgage options carefully and be clear on all your real estate costs.
Your deposit is a down-payment on your new home and, generally speaking, the bigger the better. If you have less than 20 percent of the real estate’s purchase price you will need lenders’ mortgage insurance. It may be possible to finance the full price of your new home but this can be risky as you start with no equity and will need full insurance.
There are two primary types of interest rates on mortgages: fixed and variable. Both have benefits and it is important to get advice – this can be provided by your financial advisor, accountant or potential lender – as to what either means for you financially.
Fixed rate mortgage is best for the borrower who wants to stick to a budget and plan their finances. You will miss out on the benefit of interest rate drops – but you are also protected against increases.
Variable rate mortgage is a flexible option if you do not mind some risk, as you may get hit with a rate rise and end up paying more interest. On the other hand, you will benefit from interest rate falls, which will help you pay off your loan earlier.
It may be possible to split your home loan so that part of it is fixed and the rest is on a variable rate. Check with your lender to confirm your options.
Type of property:
Deciding whether to buy a new or old property for sale depends on your circumstances and there are plenty or variable to assess.
For instance, older houses tend to be built on larger blocks of land, while new home buyers or builders more often qualify for governments grants and subsidies. And do you really need that big backyard? Town houses and apartments may be a better bet if you are starting out in the real estate market.
However, there are pros and cons to new and old houses and units that apply when looking at homes for sale.
Get the right legal advice:
Having a legal representative guide you through the real estate purchase process is important. You can hire a lawyer or a qualified conveyancer to take you from exchange of contracts to settlement and completion. These professionals are qualified to give you legal advice on your contract for sale, the obligations of buyer and seller, your rights, what the contract conditions mean (including any added clauses from the seller), and the state the property for sale is in.
The extra costs:
Stamp Duty; This is applied on the purchase value of a property and charged by state and territory governments to the buyer of a home. Stamp Duty can be sizeable depending on location. For example, the Stamp Duty on a $500,000 property with a 20 percent deposit will come to $25,138 in South Australia, $18,311 in New South Wales, $14, 658 in Victoria, $13,843 in Western Australia and $1,311 in Queensland.
Finance and insurance costs; Lenders may impose fees, such as application, valuation and settlement fees. Lenders’ mortgage insurance may apply if you need to borrow more than 80 per cent of the purchase price of the property. Building insurance is usually applied to properties not subject to strata title. Contents insurance is worth considering, to cover fixtures and fittings. Mortgage protection insurance covers your mortgage if illness or injury prevents you from keeping up to date with repayments.
Council rates, strata fees and utilities; These apply to owner of the property from day one after settlement. If you have been renting, you will likely have been protected from these fees.
Utilities; these include water, power and gas. These may need to be connected or re-connected, which involve additional expenses, so check with your real estate agent to see what is required.
If you are thinking of purchasing a new home and need to talk to a specialist Financial Planner or Accountant, please don’t hesitate to get in touch with the team at Fortis Accounting Partners on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
